Importing Used Cars Will Now Be Cheaper

The High court in Mombasa has declared  the current taxing formula on used motor vehicles used by the Kenya Revenue Authority (KRA) illegal, in the case filed by Car Importers Association of Kenya, the judge ruled in favour of the petitioners and found KRA’s taxation of used cars to be unfair and arbitrary. This ruling is set to see taxes paid for these vehicles drop significantly in the coming months.

Dealers such as Toyota Kenya have been providing KRA with price quotations as the basis for calculating import duties and other levies on second-hand cars shipped in from overseas markets. These starting quotations, known as current retail selling prices (CRSP), car dealers have argued, are highly inflated and thus resulting in higher taxes running into millions of shillings for the dealers in used imports.

Justice Eric Ogola declared that the CRSP is unconstitutional and ordered KRA to create a new price list while consulting used car dealers this time, the dealers had complained that the taxman sometimes hands over prices which do not make sense, adding that sometimes they are supplied prices higher than actual showroom prices.

The judge ruled that the taxman was also unfairly claiming higher taxes, including by claiming that cars had been modified and gathering questionable data to justify its position. “Clearly, the basis of such taxation is guesswork whose result is ambiguity which has led to some importers being left off the hook while others being forced to pay.”

The judge ruled that should he allow the current motor vehicle tax process to continue, he would be promoting bias, unfairness and discrimination in assessment of tax due.